U.S. health care is more broken than we thought

The cover story of last week’s Time magazine wasn’t the usual fare, such as “Marco Rubio: Savior of the Republican Party.”

“Bitter Pill: Why Medical Bills Are Killing Us” is a serious, exhaustively reported piece about the scam the U.S. health care system has become. The article, by Steven Brill, has created unusual buzz in Washington; it spares no vested interest.

Nonprofit hospitals, the cornerstone of many communities, capriciously overcharge patients, sticking the powerless with exorbitant bills while paying lavish salaries to their executives. Drug companies, which charge humongous markups to American customers, rake in huge profits. Trial lawyers, with the threat of legal action, add to the cost of defensive medicine. President Obama’s Affordable Care Act does little to bend the cost curve, and while conservatives rail against Medicare, the government-run program is more efficient and customer-friendly than the private system.

None of this is new. Yet it resonates for several reasons: Brill documents the particulars more forcefully, and, as health care spending approaches 20 percent of the U.S. economy, almost every American is affected and the debate is politically polarizing.

When asked to respond to these charges, most of the system’s stakeholders react in similar ways: Many of these criticisms are valid – except when it applies to us.

The American Hospital Association says, yes, the current billing system is broken, but hospitals aren’t to blame. When patients look at hospital bills, says Richard Umbdenstock, the group’s president, the prices reflect not just the cost of a particular item but “all the resources required to provide the care.” Moreover, he says, the “vast majority” of patients don’t pay the initial bill; that’s just the starting point.

Linda Lipsen, chief executive officer of the American Association for Justice, which represents trial lawyers, said in an interview that Brill’s article correctly focuses on health care costs. Brill opposes the limits on malpractice suits advocated by some conservatives. Yet Lipsen takes issue with his more moderate call for a “safe harbor” standard that would require a defendant – a hospital or a doctor – to demonstrate that care was within the bounds of accepted medical practice.

“This would preclude some people who are injured or killed being able to get to court,” Lipsen says. “Each case has its individual practices.”

The pharmaceutical industry insists that drugs account for less than 10 percent of health care costs, are rising at a slow clip and that bargaining by big-bulk purchasers creates a genuine market system.

The administration argues that the Affordable Care Act will significantly reduce costs; Republicans on Capitol Hill dismiss the arguments in Medicare’s favor.

If all this were true, the system would be fine. It isn’t. Three-fifths of U.S. bankruptcies are caused by medical bills. There is little procedure or price transparency; it’s difficult to check a physician’s record or the performance of drugs and treatments.

Pharmaceutical and medical-device companies, according to Brill, “regularly put clauses in sales contracts prohibiting hospitals from sharing information about what they pay and discounts they get.”

More highlights:

∎ A woman enters a Connecticut hospital with chest pains. She is examined and is released after four hours once it has been determined there is nothing wrong. The bill: $21,000.

∎ A monthlong stay in a Dallas hospital for treatment of pneumonia cost more than $474,000, less than 20 percent of which was covered by insurance.

∎ The CEOs of hospitals affiliated with universities make three times more than the president of their university systems.

∎ Medical device makers, who are angry about the small tax imposed by Obamacare, are producing returns of 15 percent or more. So are drug companies that charge about a 50 percent premium to patients in the U.S.

∎ Medicare is prohibited by Congress from using its leverage to bargain for better prescription-drug prices or to use “comparative effectiveness” tests in approving drugs or procedures.

Medicare gets whacked a lot these days by politicians. Brill demonstrates that the program is more cost-effective. Rather than raising the eligibility age for benefits, he says, lowering the age limit and allowing more people to qualify would decrease health care costs.

Obama’s health care law guarantees that a lot more Americans will have health insurance – a good thing – but the administration is on shakier ground when it contends that the measure will curb costs.

Overall, the system is predicated on a nebulous assumption that there is a real marketplace affected by supply and demand. That’s largely a myth. Consuming health care isn’t the same as purchasing shoes or a car: If you go to the emergency room or are diagnosed with cancer, you’re not likely to bargain-shop.

The system’s big stakeholders have well-connected lobbyists and are important campaign contributors or forces in their communities.

They react to articles such as Brill’s, but really aren’t much worried. They are rich, powerful and protected.

This is why our jobs have gone to China, where employers don't pay anything for health insurance, Medicare, Medicaid, or Social Security. Yet all Chinese citizens are covered at lower cost under a national plan paid for by individuals through income taxes and a sales tax. In order to bring back our jobs we need to: 1. Lower the cost of US manufacturing by completely eliminating all employer health care and SS related contributions. 2. Require only one payroll deduction - for income tax based on several higher tax brackets that pay for 50% of Social Security and 50% of nationalized US Health Care. 3. Pay for the remaining 50% of SS and USHC with a national sales tax on all products sold here, including Chinese imports. Why continue to make it a no-brainer for consumers to walk into stores and buy lower cost Chinese products because huge costs of health care and SS are factored only into US product prices? A higher US GDP growth rate would translate into more jobs and higher tax revenue to pay down the debt and rebuild our infrastructure. Here are the approximate GDP growth rate numbers now: China 7.3, US 2.2

Jim... wrote:

03/05/2013

Here is the part I will never understand. You get a large group of people together and negotiate a lower rate with the hospital for an "item or procedure". Is the hospital saying they are losing money at that lower price. Is it the hospitals mindset that if they lose money then they will make more by the volume discount. I don't think so, they obviously are making money with the lower negotiated price. SO, if they are actually making money then why not charge everyone that price. How about calling all the uninsured a large group and give them the same price. No, what they do is charge the person without insurance a much higher price. The person that can afford it the least, they charge even more. Where is the logic or fairness in that. As the article points out, when you need a hospital, rarely do you (or have time to) compare prices like buying a TV.

BestPresidentReagan wrote:

03/05/2013

I will bet the farm that not one single democrat that comments here can name 3 blood work labs in their area and which lab has the best prices.....the reason why they dont know is that democrats dont care what the price is because their big bloated govt will pay for it .....democrats are entirely disconnected from where Govt gets its money

Gen_X_er wrote:

03/05/2013

Well-said Mr. Hunt. I look forward to reading Brill's article. The evidence is mounting in support of a single-payer system. Naturally, opposition will increase from the present systems of well-funded health industry lobbyists who are making massive profits at the expense of their clients' medical and financial health. Another example of: "He who has the gold makes the rules". Is this the democracy our Founders intended?